Hot Hotel Investment Markets of Asia Pacific

24 May 2004

The Maldives, Macao, Sydney and Hong Kong are the hot hotel investment markets of Asia Pacific, according to Scott Hetherington, Managing Director, Jones Lang LaSalle Hotels, Asia. In his speech at the 7th Asia Pacific Hotel Investment Conference held in Singapore today, Mr Hetherington identified these as the stand out markets that offer hotel investors and operators exceptional opportunities for trading performance growth and capital appreciation.
“The Maldives Islands offer one of the most pristine environments in the world and are accessible to both the Asian and European markets. The supply of upper tier hotels is limited and well branded and from our research, there is limited price sensitivity,” said Mr Hetherington. “These factors, as well as the recent release of 11 islands for small scale development, make it an ideal investment destination,” he added.

Macao is currently a hotbed of tourism growth and investment activity, with arrivals from Mainland China growing by 35% during 2003, despite the outbreak of SARS. “The market is driven by a proactive government and some US$3 billion is being invested into the tourism and gaming industry,” said Mr Hetherington. “The real potential for Macao is to become a destination resort, offering a broad cross section of facilities at the mouth of the Pearl River Delta,” he added.

In contrast to the development activity of Macao, it is a reduction in supply coupled with a strong rebound in international arrivals that is set to boost the performance of the Sydney hotel market. “As a result of residential conversions, the Sydney hotel market has seen a 14% reduction in supply since the Olympics in 2000,” revealed Mr Hetherington. “As this is combined with a 7.3% increase in arrivals to Australia during the March quarter 2004, we forecast strong growth in room yield and asset values for Sydney over the next few years,” he continued.

Similarly to Macao, growth in visitors from Mainland China is driving the improved outlook for Hong Kong hotels. “We have certainly witnessed a profound shift in sentiment in Hong Kong since the depths of the SARS crisis in May 2003,” said Mr Hetherington. “Building on from the 7.3% growth in visitor arrivals during the final quarter of 2003, we expect the continued relaxation of visa requirements for Mainland Chinese visitors will lead to increased hotel occupancy and rates across all sectors throughout 2004,” said Mr Hetherington.

As well as identifying the ‘hot’ markets, Mr Hetherington noted that hotel investors would be well served to keep an eye on Bangalore, Delhi and Mumbai in India which are set to benefit from a strong economy and increasing presence of international operators, as well as Bali, Bintan and Jakarta in Indonesia, where open market transactions are becoming more common.

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Mr Hetherington continued his speech with a discussion of investors’ perennial favourites. “Regardless of the supply outlook or trading performance, investors will always be interested in the fundamentals of China, Thailand, Japan and other Australian markets.

To conclude his speech, Mr Hetherington looked at the hotel transactions of the past year. “While many believe the Asian hotel investment market is relatively illiquid, we witnessed US$1.5 billion worth of hotels change hand during 2003,” he said. “This was largely driven by the flood of sales in Japan, which accounted for 56% of total value,” he added. “Of significant note was the fact that most transactions were undertaken on a transparent basis, demonstrating the maturing of the Asian markets,” Mr Hetherington concluded.

The Australian hotel investment market continues to be active. “During 2003, there were some 25 major transactions spread throughout the country at a total of A$826 million. Buyers included property funds, high net worth individuals, hotel owner operators and institutional investors,” he said. “And, looking at the sales already closed so far this year, it looks as if 2004 is going to be another busy year,” he added.